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UF Financial Accounting
Exam 2
59
Accounting
Not Applicable
03/30/2004

Additional Accounting Flashcards

 


 

Cards

Term
inventory costs
Definition
sum of costs incurred bringing an article to useable/salable condition and location
Term
sales revenue
Definition
= (# units sold) * (sales price)
Term
COGS
Definition
= (# units sold) * (unit costs)
= BI + P - EI
(beg inv + purchases - end inv)
Term
goods available for sale
Definition
= BI + P
(beg inv + purchases)
Term
weighted avg method
Definition
(cost of goods avail for sale)
------------------------------
(# of units avail for sale)
Term
4 types of inventory costing methods
Definition
-FIFO
-LIFO
-Weighted Avg Method
-Specific Identification Method
Term
gross profit
Definition
= net sales - COGS
Term
LIFO reserve
Definition
a contra-asset account for the excess of FIFO over LIFO inventory

Diff in BI = BI LIFO - BI FIFO
Diff in EI = EI LIFO - BI FIFO

Diff in COGS = (Diff in BI) - (Diff in EI)
Term
lower of cost or market (LCM)
Definition
if (cost is lower)
done.
else (NRV is lower)
COGS (diff)
  Inventory (diff)
Term
inventory turnover ratio
Definition
COGS
-------------
Avg Inventory

Measures how many times inv was produced and sold during period.

Inc - means inv moves quickly through production to customer, reducing overhead.
Term
fixed asset turnover
Definition
(net sales)
----------------------
(avg net fixed assets)

Measures sales dollars generated by each dollar of fixed asset used.

Inc - means efficient mgt of fixed assets.
Term
capital expenditure
Definition
huge additions that increase the productive life or efficiency
--added to asset account.
Term
revenue expenditure
Definition
maintain productive capacity for current period
--not added to assets.
Term
ordinary repairs and maintenance
Definition
expenditures for normal operating upkeep
Term
extraordinary reprairs
Definition
infrequent expenditures that increase usefulness in the future.
Term
depreciation
Definition
the process of allocating the cost of buildings and equipment over their productive lives using a systematic and rational method
Term
book value
Definition
= (acquisition cost) - (accumulated depr)
Term
residual value
Definition
salvage value - estimated amount to be recovered at end of the useful life
Term
straight-line depreciation
Definition
(cost - residual)
----------------- = depr expense
(useful life)
Term
units-of-production depreciation
Definition
(cost - residual)
----------------- * (actual production) = depr expense
(useful life)
Term
double-declining balance depreciation
Definition
(cost - accum depr)
------------------- * 2 = depr expense
(useful life)
Term
asset impairment
Definition
occurs if (future cash flow < book value)
then record an asset impairment loss
Term
amortization
Definition
depreciation of an intangible asset
Term
goodwill
Definition
(purchase price of a business) - (fair market value of the business' assets & liab)

Means the favorable reputation that a company has with its customers.

The only way to report goodwill as an asset is to purchase another business.
Term
liabilities
Definition
probable deobts or obligations of the entity that result from past transactions, and will be paid with assets or services.
Term
working capital
Definition
(current assets) - (current liabilities)
Term
accounts payable turnover ratio
Definition
COGS
---------------
Avg Acc Payable

Measures how quickly mgt is paying trade accounts.

Inc - means paying quickly.
Term
FICA
Definition
paid by both employee and employer
Term
time value of money
Definition
interest associated with the use of money over time
Term
deferred revenues
Definition
revenues that have been collected but not earned
Term
contingent liability
Definition
a potential liability that has arisen as a result of a past event, but is not an effective liability until some future event occurs.
Term
operating lease
Definition
does not meet any of the 4 GAAP criteria:
1) lease term at least 75% of expected life
2) ownership transferred at end of lease
3) lease allows purchase of asset at a price below market value
4) present value of lease payments at least 90% of fair market value of asset
Term
capital lease
Definition
meets at least 1 of 4 GAAP criteria:
1) lease term at least 75% of expected life
2) ownership transferred at end of lease
3) lease allows purchase of asset at a price below market value
4) present value of lease payments at least 90% of fair market value of asset
Term
annuity
Definition
a series of periodic cash receipts or payments that are equal in amount each interest period
Term
deferred taxes
Definition
the difference between income tax expense and current taxes payable, caused by diff rules for GAAP statements & IRS tax returns.
Term
temporary differences
Definition
timing differences that cause deferred income taxes and will reverse in the future.
Term
defined contribution plan
Definition
employer makes cash payments to an investment fund, and when employee retires he is entitled to part of the fund.
Term
defined benefit plan
Definition
employee's retirement benefits are based on a % of their pay at retirement or the number of years of employment.
Term
debenture
Definition
unsecured bond, no assets are specifically pledged to guarantee re-payment
Term
bond principle
Definition
amount payable at maturity of a bond and on which periodic cash interest payments are computed
also called: par value, face amount, maturity value
Term
bond indenture
Definition
bond contract that specifieds the legal provisions of a bond issue
Term
callable bonds
Definition
may be called for early retirement at the option of the issuer
Term
convertible bonds
Definition
may be converted to other securities of the issuer
Term
senior debt
Definition
gets preference over other creditors if bankruptcy, etc
Term
subordinated debt
Definition
paid off after some other creditors
Term
debt-to-equity ratio
Definition
total liabilities
------------------
owner's equity

Measures relationship between amount capital provided by creditors and amount provided by owners.

High - means company relies heavily on funds provided by creditors, increases risk
Term
coupon rate
Definition
stated rate of interest on bonds
also called: contract, stated rate
Term
market rate of interest
Definition
current interest rate on debt when incurred

also called: yield, effective interest rate
Term
when does a bond sell at par?
Definition
stated rate = market rate
Term
when does a bond sell at a premium?
Definition
market < stated
Term
when does a bond sell at a discount?
Definition
market > stated
Term
times earned ratio
Definition
NI + Int Exp + Inc Tax Exp
--------------------------
Int Exp

Measures the amount of resources generated for each dollar of interest expense

High - means extra margin of protection in case profitability deteriorates.
Term
zero coupon bonds
Definition
coupon rate=0, pay no cash interest.
issue price is computed by present value principle only.
Term
straight-line amortization
Definition
a simplified method that allocates an equal dollar amount to each interest period
Term
how are gains or losses recorded when bonds are retired early?
Definition
extraordinary item
Term
trademark
Definition
an exclusive legal right to use a special name, image, or slogan
Term
copyright
Definition
the exclusive right to publish, use, and sell a literary, muscial, or artistic work.
Term
patent
Definition
granted by federal govt for an invention;

exclusive right given to owner to use, manufacture, and sell the patented product
Term
franchise
Definition
a contractual right to sell certain products or services, use certain trademarks, or perform activities in a geographical region
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